To sue or not to sue: the why, when and how of protecting trademarks
Mark I Peroff and Kelly D Talcott
Kirkpatrick & Lockhart LLP, New York,NY
Driving to work one morning, you see your company’s name emblazoned on the side of a large white pickle delivery truck. Up to now, you were not aware that your financial services company was also in the business of manufacturing and delivering pickles (of course it is not). You arrive at your office and call your lawyer to ask for some advice. Can your company force the pickle company to stop using your name? More importantly, should you take action and how can you stop this unauthorised use without breaking the bank?
Business owners confront questions like this every day. As brands proliferate throughout an increasingly borderless marketplace, with business services, such as banking, e-commerce and insurance, representing an ever-growing source of new brands, potentially conflicting uses of similar marks are also increasing. Not all of these apparent conflicts, however, are actual conflicts. The mere fact that two companies are using the same brand name does not necessarily mean that one company can stop the other. Learning how to assess whether to bring a lawsuit for an unauthorised use of a brand name that is identical or similar to your own brand can help you increase the effectiveness of trademark enforcement, which ultimately affects the value and strength of your trademarks.
Before discussing how to evaluate a possible infringement of your company’s rights, a few definitions are in order. First and foremost, a brand name is the name by which your customers and the trade identify and call your products and services – for example: BIG MAC hamburger sandwiches, CITIBANK financial services, AMERICAN AIRLINES transportation services. Brand names which are legally protectable are referred to as trademarks – for example: BIG MAC, CITIBANK, AMERICAN AIRLINES.
BIG MAC is a mark that identifies the source of products; similarly, CITIBANK is a service mark that identifies the source of services. Trademarks (including service marks) such as these play several roles in a successful business. In addition to identifying the source of a product or service, they serve to distinguish one product or service from another. As purchasers become familiar with the products or services associated with particular marks, the marks provide some indication as to the quality of the goods or services being offered, and sometimes stand for the general quality of a wide range of goods or services provided by an entire company. Finally, as brand loyalty develops, marks acquire goodwill, an important corporate asset.
It is when one of these roles is encroached upon by another’s use of a similar or identical mark that taking legal action to stop the unauthorised use may make sense. Before taking that expensive, time-consuming step of filing a lawsuit for trademark infringement, however, a prudent trademark owner should look closely at how the potential defendant is using the offending mark and determine whether that use really does impinge on one of the roles played by the existing mark. Assuming a real threat exists, the next step is to consider the alternative courses of action, which may include filing a lawsuit, that may achieve an acceptable end result. Finally, preparing ahead of time for a dispute will increase the effectiveness of any action taken while simultaneously reducing expenses.
Knowing your marks
It would seem to go without saying that you cannot protect what you do not know you own. Yet it is not uncommon for companies to lack an accurate, up-to-date familiarity of the trademarks they own and the status of those marks. Thus, the first step to protecting trademarks is to know your company’s marks, which can be accomplished through a trademark audit (sometimes more benignly called a survey). This should uncover what marks the company owns, what products or services they cover, where they are registered and the status of those registrations. All of this information will be necessary in the event someone else begins using a mark similar to one owned by the company and your company needs to evaluate quickly whether that use is damaging.
Along with an inventory comes the opportunity to identify the company’s most important marks. One way to do this is to segregate the marks into groups. For example, category A marks might be the marks that are key to corporate identity, house marks that are used on multiple products or marks used for high-revenue products or services. These are marks that are important enough to the company so that substantial resources must be expended on their protection. Category B marks could be marks used by divisions or by solid but not spectacularly performing products. The company might be less inclined to spend large sums to protect these marks. Everything else would be grouped as category C marks, which could be ones that the company deems worthy of maintaining, but which it is not necessarily going to spend lots of money to protect.
A categorisation system such as the one described above also helps for planning purposes; over time, the company will develop an understanding of what it can expect to expend each year to maintain and defend marks in each category. Furthermore, as new marks are created and registered they can be assigned to one of the three groups, and as obsolete marks are retired they can be removed.
Should we sue?
The high cost of litigation, both in terms of money spent and human resources expended, should deter some trademark owners from running to court every time anybody uses a mark that is similar to one of their own brands. There are, of course, times when a lawsuit is the only appropriate reaction to apparent infringement. A hastily filed lawsuit, however, can sometimes do more harm than good. What follows are some guidelines for assessing the level of the threat when confronted with what appears to be trademark infringement.
First, understand that trademarks can be lost if they are not protected. A trademark owner has an obligation to police unauthorised use of its mark in order to avoid deception among purchasers. When others begin to use a mark that is the same or similar to one of your company’s, and for the same or similar types of goods or services, they chip away at the uniqueness and distinctiveness of the trademark, which is so important to your company because it directs customers to your products and services.
The damage done by an infringer is typically corrosive, wearing away at the mark bit by bit. First, an infringer can begin to appropriate for itself some of the goodwill that a mark has helped the company acquire over years of use. The infringer can also catch a free ride off of the reputation for quality that the company’s marks have come to represent. Of course, buyers can begin to confuse the infringer’s product or service with those offered by your company, or they can simply think that your company is the source of the infringer’s product or service, or maybe that your company has sponsored, endorsed or licensed the brand to another company. All of the foregoing can result in a loss of sales (ie profits) for your company and a whittling of the brand’s ability to function as a trademark. In the worst case, failure to take action could result in an abandonment of rights. NYLON, ESCALATOR and ASPIRIN were at one time very valuable trademarks which were lost due to the failure of their owners to police and stop unauthorised uses of these marks.
These problems do not exist, however, in every case of apparent infringement. A pickle producer and a financial services company could very possibly share the same trademark, but for radically different products or services. In such a case, depending on the mark, neither would have to worry that the other’s use of the mark would cause any harm. On the other hand, if the mark in question is truly famous – for example: SONY, WAL-MART, PEPSI – even use by another company in a totally different field could cause some injury to the owner of the famous mark. Merrill Lynch Pickles, for example, may very well be as actionable by Merrill Lynch as Vlasic Mutual Funds would be to Vlasic. Amber Pickles and Amber Mutual Funds, on the other hand, may be able to co-exist quite peacefully without causing confusion as to source or possible sponsorship.
The key is to consider each situation individually and identify whether and how the allegedly infringing use of the mark actually harms the company. A thorough investigation will help in evaluating the situation and yield dividends later. This may include securing product samples and advertising materials, monitoring websites and press releases, and conducting purchaser surveys to measure the distinctiveness of your company’s mark or to determine how confusing the relevant buyers perceive the offending mark to be. Through such an investigation, you may learn that the offending mark is not as serious a threat to your company as you first assumed it was. On the other hand, you may confirm that the mark really is a threat, in which case through the investigation you will have gathered important evidence to support your company’s position going forward.
It is also important to appreciate the factors that a court considers when evaluating whether it is likely that the relevant purchasers would be likely to be confused when confronted with the use of the offending mark. These include such things as: how similar the two marks are; how similar the products or services of your company and the other company are; whether similar marketing channels are used to sell your respective products or services; how much care a potential purchaser is likely to use when selecting the goods or services in question; what the alleged infringer’s intent was when it selected the mark at issue; and whether there is evidence of actual consumer confusion. In addition, so-called strong marks – marks that consist of made-up, fanciful words, which bear little obvious relationship to the product or service at hand – will tend to receive greater protection than weak marks that consist of ordinary words or words that describe a feature, characteristic or quality of the product or services. Finally, if the offending mark is for a product or service that differs from one that your company is engaged in, a court will consider whether it is likely that your company would expand its product line or service offerings into the area occupied by the alleged infringer.
Fools rush in
Confirming that a competing mark is a threat to one of your company’s marks does not automatically mean you need to sue to secure relief. Not every infringement demands a lawsuit in response. There is a wide range of potential actions that can yield positive results in an efficient and cost-effective manner. Knowing what your goal is will help you focus your efforts and select the most effective method of resolving the issue. For example, the goals can range from removing the offending mark from commerce to putting a counterfeiter out of business. Your goal will in many cases drive your choice of what type of action to take when you are threatened by an infringement.
Thousands of potential trademark disputes are resolved each year through a simple exchange of letters. The tone of the opening salvo, of course, ranges from friendly and conciliatory to terse and demanding. Whatever the tone, the message conveyed by a cease-and-desist letter remains essentially the same: our company owns this mark for these goods or services; your company is using that mark for similar goods or services; your use is harming us by (and here describe the manner of harm); stop using our mark. Very often the infringer is unaware of the fine points of trademark law and may have no idea that its use of a mark is threatening any marks owned by your company. Upon learning of your company’s position, the infringer often seeks to broker an honourable withdrawal of the infringing mark from the market, one that will minimise its financial loss while still respecting your company’s marks. In this sort of situation, infringement may be dissipated at a relatively low cost.
An effective cease-and-desist letter will also make good use of the information gathered during the investigation stage. Showing the infringer up front that your company has done its homework will make it all the more difficult and less likely for the infringer to justify opposing your position.
Filing a lawsuit to resolve an infringement issue is, of course, a viable and powerful option. Where there has been a history of infringement from a particular party, or where there is reason to believe that writing letters will not resolve the situation, or where the damage caused by the infringement is particularly grievous, it may be more prudent simply to file a lawsuit, have it served on the defendant and pursue relief through the courts. Any settlement discussions then take place against the backdrop of a filed lawsuit with its ticking deadlines and substantial expenses, which represents a serious advantage for a well-prepared plaintiff.
Another option is to secure the forum for the dispute first by filing a lawsuit but holding it for a time and advising the defendant that it has been filed and that unless a settlement is reached within a finite time period the complaint will be served and the lawsuit will move forward. This can be helpful in situations where a strong cease-and-desist letter could result in causing the defendant to file a lawsuit as a declaratory judgment plaintiff, threatening your company’s ability to choose the location of the court that will resolve your dispute. Having a lawsuit in the can, so to speak, means that it may be more difficult for the defendant to select a forum other than the one you have chosen and may promote a speedier resolution of the problem.
Proper planning
As noted above, planning to enforce trademarks means thinking logically about the mark in question and how the use of a particular offending mark may impede the value of your company’s marks. If your company owns many marks, a certain amount of litigation is to be anticipated. One way to reduce the cost of such litigation while simultaneously enhancing its effectiveness is to prepare portions of the pleadings in advance.
For example, a routine part of many trademark infringement lawsuits is a recitation by the owner of the mark: of how long the mark has been in use and for what types of goods and services; the amounts spent to promote the products or services associated with the mark; any recognition by consumers of the mark’s distinctiveness; and other such facts that give the court an idea of what the mark stands for. These paragraphs do not have to be written at the last minute but can be maintained at the ready in the event of litigation.
Similarly, many trademark lawsuits also involve motions seeking a preliminary injunction from the court, stopping the defendant from using the offending mark pending resolution of the case at trial. Here, too, there are standard factual statements and legal arguments that can be prepared in advance and simply updated to reflect recent changes in the facts or the law.
Discovery is a standard part of most trademark infringement lawsuits, even at the preliminary injunction stage. The general things that one wants to know from an infringer – how the mark is used, for how long it has been in use and where, how the mark was selected, etc – are not going to change greatly from case to case or even from mark to mark. If the basic outline of these discovery requests is prepared ahead of time, then the requests can be tailored to the facts of the specific case relatively quickly and for substantially less cost than to rewrite the same requests for each new lawsuit.
Think strategically
With some careful thought, a trademark owner can make efficient use of its resources to provide a high degree of protection for its marks. Avoiding knee-jerk reactions, analysing the claimed infringement closely, making strategic decisions about how to approach an alleged infringer and doing some of the work in advance can pay off with more effective, and less expensive, results.